TAX TIME: Utah Legislature Approaches the Final Stretch

With fourteen more days of floor time scheduled to get their work completed and a 2018 budget finalized, the Utah Legislature has its work cut out for them. Senate President Wayne Niederhauser (Republican – Sandy) said that a current priority is to rework the state’s tax structure, thereby attempting to “broaden the base while lowering the rate.” As a professional public accountant, Niederhauser has reviewed substantial economic theory to be able to oversee efforts that include “recapturing” lost sales tax opportunity involving online sales, “revisiting” Utah’s tax on food, and a “passionate restructuring of the state’s income tax system.”

Ongoing Discussions

During a recent press conference, Niederhauser said that low-income families were “actually hurt by taking the sales tax off food” because the reduction in sales tax effectively removed a stable source of income that could be used to fund social programs. Big ticket items, such as the proposed collaboration with Salt Lake City and County on the development of affordable housing for the state’s less privileged, are more difficult to fund according to Niederhauser.

Niederhauser also revealed that the sales tax rate discussions are still in the 3 to 5 percent range; the statewide sales tax is presently at 4.7 percent with some political subdivisions (counties, cities, etc.) using local authority where required. One of the emerging tools lawmakers are using to change tax systems throughout the nation and to revitalize struggling budgets is in the creation of special service districts, where water users might be assessed a use tax, as an example, to aid in aging infrastructure requirements. Also included in their discussions are the future requirements of “infrastructure, education, transportation and water,” according to Niederhauser.

Three Revenue Streams

Like many state taxing authorities, Utah has revenue streams from taxes on retail sales, income and real property. Additional opportunities in the form of “found money” include various matching grants from foundations and the federal government. In that fiscal area, legislators attempt to leverage state monies and the efforts of constituents to apply for the funds.

Two years ago, then Representative Johnny Anderson (Republican-Taylorsville) oversaw the indexing of the tax on gasoline and fuel taxes, allowing for ongoing fluctuation according to the prevailing and current price at the pump. That’s one area that will not require much attention by lawmakers in this session, other than to note the revenues resulting from that prior effort.

The goal in their efforts, Niederhauser said, was an attempt to “stabilize revenue resources… Discussions also seem to gel around a flat tax, an effective or single [income tax] rate of 5 percent.” Senators Curt Bramble (Republican – Provo) and Wayne Harper (Republican – Taylorsville) have been working on a bill that allows for the online tax monies to be realized more effectively, since most believe those transactions represent an emerging and increasing sales, thus taxation, opportunity.

With only $300 million in new revenue identified this year and $540 million in requests via the legislative process, some programs and budgets will be unfunded by the end of the session. Lawmakers acknowledge that the hard work has begun now that the session is more than half over. The state’s revenue numbers are expected to be released later on this date, allowing the Executive Appropriations Committee to commence their work of prioritization in earnest. It all has to happen before the clock strikes midnight on Thursday, March 9.

Editor’s Note: Late Friday, the state’s OMB identified approx $100M in surplus funds. 90% of those monies are expected to go to education budgets, according to Pres. Niederhauser.

Here is an interactive state revenue tracking resource furnished by Pew. The difference between Utah and the 50 state avg is explained by the populace of Utah being less than other states when averaged:

http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind0

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